Eight Steps To Create A New Organization Design
Eight Steps To Create A New Organization Design
Eight Steps To Create A New Organization Design
To transform an organization, the most often used levers by a business leader are setting the strategy and
appointing the right people to operationalize the business vision. Though good people are important, they do
not work in isolation. The organization design defines structures, processes, metrics and reward systems, and
people practices that will ensure that individual and organizational energy is focused on those activities that
support the achievement of the strategy.
Organization Design is the means for creating a community of collective effort that should yield more than the
sum of each individualʼs efforts and results. The organizationʼs structures, processes and practices channel and
shape peopleʼs activities and energy. The values and culture of the organization influence interpersonal
interactions and determine which decisions get made. The form of the organization can enable or inhibit
peopleʼs innate desire to do good work on a daily basis. It is important to create an optimal organization design
that serves the business strategy and makes it easier for people to collaborate, innovate and achieve.
A hybrid approach that combines the positive aspects of both the approaches is shown in the figure below.
Design of an organization is not an exact science. Hence the main thrust of this approach is to define design
criteria accepted by the organization and propose options that can be evaluated by the executive team based on
the identified criteria. It is imperative to ensure all design requirements and organizational constraints are
captured as design criteria and the deliberations of the executive team are facilitated to pick the most optimal
design.
There are two distinct streams of work that can be carried out simultaneously, which contribute together for
identifying design options.
Each step shown in the figure above is described below.
Organizational capability is defined as an integrated set of skills, technologies and human abilities that create
competitive advantage for the organization. Generally, there are 3 areas in which competitive advantage can be
gained- product, customer, and operations.
For a strictly product focused company, new product development, innovation management, market research
and intelligence might be essential processes. For a customer organization, relationship management,
knowledge management, and solution development processes might be important. These integrative processes
can be defined in the organization design as a separate function or additional responsibility.
To help get a good enough answer to the “how many layers” question, there are four rules of thumb (related to
the four management activities of planning, coordinating, controlling and allocating). Each layer should:
1. Be flexible and adaptable enough to enable managers to forward plan in a context of constantly changing
operating environments;
2. Facilitate co-ordination between units (There are six forms of business unit to unit co-coordinating activity;
leveraging know-how; sharing tangible resourcesʼ; delivering economies of scale; aligning strategies;
facilitating the flow of products or services; creating new business)
3. Have appropriate control and accountability mechanisms ( note that any task, activity, or process should
have only one person accountable for it and accountability and decision-making should be at the lowest
possible level in the organization; overlap and duplication, fuzzy decision-making and conflict resolution
processes are all symptoms of lack of adequate controls );
4. Enable its managers to allocate effectively the range of resources (human, time equipment, money, and so
on) they need to deliver their business objectives.
Following the steps mentioned above will provide the team, entrusted with creating a new organization design,
enough information to evaluate the potential options. It is only through deliberations on the data collated and
building a consensus with the senior executives that a final organization design can be created.